China's Strategic Oil Stockpiling Unlikely to Bolster Global Prices

MOSCOW (Sputnik) — China's stockpiling of oil imports to fill its strategic petroleum reserves (SPR) will not curb the global fall in crude oil prices, a Saxo Bank strategist said on Wednesday.

"China's strategic reserves can potentially drive up [crude oil] prices, but only to a small degree," Saxo Bank Asia macro strategist Kay Van-Petersen told journalists.

Asia's largest economy has been expanding its crude oil reserves to last it for the next one or two decades, in a bid to bolster energy security, Van-Petersen said. One of the key aspects of Beijing's energy strategy has been to invest heavily in oil-rich regions and developing economies, specifically in Africa.

The analyst underscored that China's SNP fills are not likely to influence global crude oil prices in the long term.

"It is a matter of strategic importance for China, but it is unlikely to cause prices to go up to $70-80 a barrel," Van-Petersen noted.

The analyst estimates the global oil supply surplus at 2 million barrels a day. Supply and demand remain a key factor in low oil prices, he reminded.

In November 2014, China announced it had finished pumping 91 million barrels (12.43 million metric tons) into four emergency storage facilities, with more fills expected to be completed in two stages. The government did not give any details of the schedule.

There are conflicting reports on the size of China's stock of oil imports. According to Petroleum Argus news agency, it is estimated to hold a total of 150 million of barrels in seven SPRs.

In 2014, Chinese oil imports surged by 9.5 percent, reaching 310 million metric tons. Of those, 33 million was imported from Russia.

Since June 2014, global oil prices have dropped by about 50 percent due to oversupply in the market. The Organization of Petroleum Exporting Countries' (OPEC) decision in November 2014 not to cut oil output levels contributed to a further slump in prices.